David Gandler. David was appointed chief executive officer of Fubo in April of 2014. Prior to joining Fubo, David served as the vice president of ad sales at DramaFever, a video streaming service acquired in 2016 by Warner Bros. He's also held position at Scripps Networks Interactive, Time Warner Cable, and Telemundo, and he has a BA from Boston University. Okay, I want to start with leadership. You have about 500 employees, David, and I'm really interested—I really believe that employees are cheaper, and they stay longer, which lowers churn, if you have a really great culture.
Absolutely.
Tell me about the culture you're trying to create at Fubo, and what are the metrics you use to determine whether the culture you're trying to create is actually being executed?
Yeah. Not an easy question to answer. I would say that from a churn perspective, you are right, culture is key. I think the average churn at technology companies out West is roughly around 12%-15%.
A year? A month?
A year.
Okay.
A year. You know, we're probably closer to... Historically, that has been the case, probably 6%-7%, maybe even less.
So like half?
Yeah, I would say even less. You know, culture-wise, you know, I think the key is that people need to feel motivated, number one. Number two, they need to feel that they're building something that they can be proud of, and that they are competing with very large entities. As you know, that has been our Achilles heel, I think, as we-
Mm-hmm
... talk about our business. And, you know, they need to feel that they're learning things, right? So when you have a very open culture, and people believe that they have access to different information—'cause, you know, if you think about corporate, everyone is siloed.
Yep.
You know, you're the finance person.
Right.
He's the sales guy.
Yeah.
So sales guy comes up with an idea, everyone goes: "Nope, that's the sales guy. He doesn't know what he's talking about.
Mm-hmm.
So, you know, we try and make sure that we have a good flow of information, and we're very transparent about it. And great ideas come from the top, they come from the bottom, they come from different groups and different people. So that's something that we are very focused on. And we want to make sure one of the other things I think that are very important is to ensure that, you know, if I'm doing a good job, you're gonna want to work with me. And so if you have high performance and high performers, then you're gonna see that there's more higher quality personnel will gravitate towards the company and towards different groups.
So we've tried to sort of create a culture of speed, velocity, and also ensure that people, you know, are empowered to actually build things, and they, you know, they're fearless. We want people to take risks, which we have been.
That lets them stay longer, and presumably, you let them fail.
Yeah.
I mean, if you let them take risks-
Of course
... you must let them fail.
Of course. I think the one thing that I personally try to do, and I think many of our top managers... By the way, most of the managers have been with me for, I don't know, at least six years. So the company is in its ninth year. And, you know, we tell people it's okay to make mistakes. I mean, you have to make mistakes. How else are you gonna know? It's just like A/B testing, right?
Mm-hmm.
You test something. Of course, you hope that your mistakes are small and your big wins are very large. But that's been sort of the nature of the business since the beginning.
Mm-hmm.
It's important because there's very little visibility, right, in our space. Every week, it's something else. Bundle, unbundle, rebundle.
So true.
Um, so-
Netflix is never gonna have an ad tier. Suddenly, it has an ad tier.
Yeah, yeah. Right. Never say never.
Yeah, never say never.
So yeah, so I think that's sort of been the nature of it, and I think people feel that it's a very fast-moving industry.
Mm-hmm.
Obviously, it's under significant duress, at the moment, but, yeah, no, you have to keep people motivated.
Okay. Staying on this culture idea, future of work. So,
Oh!
... you know, I gotta tell you-
Yeah
... I think this is one of the most interesting topics going on-
Yeah
... not in media-
Yeah, yeah, in general.
... but just writ large.
Yeah, yeah.
Yeah, for America.
Yeah.
Um, what-
Internally and externally, by the way.
What's that?
Internally, meaning within the company as well, it's a topic of debate all the time.
Is it really?
Yeah. It's not just something-
So what are your—
Yeah
... required days per week, and what-
Yeah
...% of people are actually not obeying that?
So, it's interesting that you bring this question up. Last week, we went from three days to two days.
Oh, interesting. Okay.
Interesting, but, you know, not ideal. There's some reasons for that. The first one is that, as you said, we have about 550 employees. Before, during the IPO, I think we had about less, just, just south of 300 employees, and so we have hired, during COVID-
Mm-hmm
... almost half the company. So, you know, during COVID, you know, the HR teams were very focused on hiring top talent, regardless of location.
Okay.
So I guess the problem that we found ourselves in is that some teams have one person in New York, you know. And so how do you tell someone, you know, come all the way from New Jersey or Connecticut or Brooklyn or wherever you are, so that you can sit on Zoom in the office? So that's one real issue. So we had to sort of go back to sort of two days because, you know, some people feel: "Why am I coming in three days a week if so-and-so is coming in?" So we're dealing with these sort of, I would say, very silly problems because in my view, and our culture is about moving quickly and delivering results. So for me, this is a real problem. I think that z-
'Cause you think that needs to be together in person?
Yeah, I think you have to be in person.
I see.
My view is three days is, should be the minimum.
Mm-hmm.
You know, I can live with 3-4 days. I just, I don't believe that people can create value when they, when they're disconnected from a company.
So culture has become a conflict-
Yeah
... with future of work, in a way.
Yes.
That's what I hear you saying-
Yeah, no, it has.
... from your tone.
It has, and it's unfortunate because, you know, I think once we sort of apply enough pressure and get people in the room, you ask them two, three weeks later when they've completed a project-
They loved it.
... or go through a sprint, they're gonna say: "Wow, it was great. Collaboration was great." And if you're a high performer, you can sit anywhere. That's like... You know this.
Mm-hmm.
You can sit in school, you can sit at your desk, you can sit in the library. You, you're gonna do a good job. So, but that's the battle we have. But, as I said, flexibility is something that we're very focused on about everything we do.
Mm-hmm.
And so we want it to be flexible, right now, and sort of revert to two days.
Mm-hmm.
But I think that, you know, over the next 6-12 months as we reorganize our team to better deal with some of the conditions, just the industry conditions that we're dealing with, we'll probably move back to sort of a three-day schedule.
Three days. Interesting.
But to me, that's the minimum, 'cause you break up the cadence. You have Tuesdays, Thursdays, and some people want-
Do you let teams decide? Some guys say, "Okay,
Yeah.
You have to be in three days, but the marketing team can decide which days those are," and the engineering team-
Personally, bad idea. Why?
Oh.
Well, because you have cross-functional teams-
Right
... and the whole point is, you know, coffee breaks, lunches, and, you know, a lot of times I think people struggle with tone. And so most people are on Zoom. You know who you are, and you're Slacking-
That's so true.
... not slacking off, but you're Slacking on your little Slack channels.
Yeah.
People ask you a question, you go, "Sorry, I didn't hear that.
Yeah.
My, you know, my Zoom is off," right?
Yeah, yeah.
I'm having technical issues.
You're watching the game on the other screen.
Yeah. So, so when someone is there, they're very focused.
Mm-hmm.
You know, if you send me a note, like 5, 5 words, I'm not gonna say: "Oh, look what Laura said," you know, "I'm, I'm upset with her." I, I know who you are.
Mm-hmm.
I know how you... You know, what your tone is.
Yeah.
I know you're not trying to be mean, so-
It's hard to build culture if no one's in the room, I think.
Well, that's the thing. And then you have other things, where someone will read an article from some pundit that's completely off, and then you have, you know, 200 people at home saying, "Oh, my God! Is this what's happening at our company?
Yeah.
You're like: "No, no, no, you have come in- ... it's not happening." But it's a tough question, and, you know, it's something we have to be careful about, but we're trying to be very empathetic.
Mm-hmm.
But the reality is, at some point, you know, benevolent dictatorships work quite well. So that moment will come.
Sometimes without the benevolent.
Yes. Well, hopefully not, but yes, that is the case.
Last year, you might recall, I asked you something about leadership, about, like, what defines your leadership style. I had a lot of CEOs that said, "The buck stops right here.
Yeah.
Love advice.
Yep.
I make decisions.
Yeah.
A number of CEOs said that, and I-
That's true.
I get that it's a lonely chair because of that, at the end of the day.
Yeah.
Somebody has to take the responsibility.
Yeah
... to make decisions.
Well, we, again, we try and be transparent, and just like we do in the analyst calls or what we do in the press, we try and answer every question in real time, upfront, in front of hundreds of people. There's no hiding.
Mm-hmm.
So I think if we can make the case, people will understand, and I think they can live with certain decisions that we make.
Yeah. Well, I'm sure you've read that we're having a lot of trouble on Wall Street, getting people in three days a week.
Yeah, yeah.
You know,
I know
... especially senior people. So to your point, if young people need to learn, who are they learning from, if seniors-
That's exactly it.
So it's like it's a future work problem writ large.
Yeah
... maybe national-
Yeah
... but certainly in America-
Absolutely
... we're redefining.
Well, you know, we have offices in Bangalore-
Yeah
... Mysore, India, which is our AI team-
Paris
...and Paris. You know, I never thought I would say this, but I feel like we have more issues around, you know, back to work policy-
Yeah
... here than we do in any of the other offices.
We're so uppity, Americans. We're so uppity.
I don't know what it is, but I was very surprised. I'm like: Wait a minute, we're the sort of... you know-
We're the workaholics here.
Yeah, exactly.
What happened to France?
I don't know.
Why are the French coming in and we're-
I don't know, but they're working hard. So good news for us. Yeah.
All right, let's talk about-
Yeah
... let's go to Fubo specifically.
Mm-hmm.
Goals: You and I are gonna be sitting here a year from now, what do you want to have achieved at Fubo? 'Cause I'm gonna write it down and bring it up when we're here a year from now.
I know,
What do you want to have achieved?
Yeah
... between now and a year from now, David, at Fubo?
You know, again, this is, you know, as we kind of prepare our budgets-
Mm-hmm
... you know, there's just a lot of questions, right? I'm sure you have a lot of questions. Investors have a lot of questions about the industry. And so there's very little clarity and visibility, and what we've done really well over time is we've been able to react.
Okay.
I like to say we proactively react-
Okay
... to situations. I think for this year, you know, our goal is to really engage consumers across the demand curve, or I should say, along the demand curve.
Okay.
Meaning right now, we offer our product, you know, built for sports fans, if you will. Is that probably one of the more expensive products in the United States, right?
Okay.
From a streaming perspective. So I think one of the key goals is to leverage the technology that we've built for greater flexibility, offering consumers, you know, different types of packaging, starting from free, free FAST channels to, AVOD, to pay-per-view, to TVOD. And so I think building out our freemium business, will be a key component. I think that's on one side.
That is a big difference.
Yeah. And, you know, I think we've done pretty well with our FAST channels within the product-
Yeah
... to drive ad revenue, and-
But it's a gate. You have a gate, you have a $70 gate.
Right.
You can get to those free channels.
Exactly.
They're not really free.
Exactly. They're not free. At the same time, there's a lot of value in those channels because behind a paywall, the argument to advertisers is, "Look, you have people that are paying for this product, paying a lot of money, discretionary income. They're not here because it's free, and, you know—
They're a more valuable target audience.
Of course they are. Because, you know, you, you might argue, a person who only wants to watch free TV, that person is very happy buying generic products.
That's true.
They don't need P&G, they don't need Unilever. So I think that's the first side, is to really create, take advantage of all the people... Remember we always talked about sort of vertical churn, was it something that you were-
Uh-huh. Yes
... you came up with?
Vertical churn, yeah.
I remember everything you say.
Yeah.
Um-
I remember everything you say.
Yeah, I know you do.
I'm writing it down.
I know you do. You can always... You know that. You can always call me out. I'm always happy to answer, any of these questions. You know, when you think about, churn, we have millions of people coming into the platform-
Mm-hmm
... because they wanna watch a game, an Olympics, a short event. And so these, since these people are coming through the platform, we should be able to offer-- it doesn't cost us anything to offer them other services, right?
Okay.
Beyond the hundred. So the idea is, you know, I'm just making up a number here. Theoretically, if you had 10 million people come in-
Yeah.
Right? Why not offer them free TV or free access, something on their, on the way out.
Well, wouldn't they come in via free and then get upsold, upsold, upsold? That's the typical-
Yeah, but this is, this is where it gets nuanced-
Okay.
... and I don't want to get too deep into the product, but-
Okay
... the risk of, you know, 'cause remember, we're just, I would say, extremely detail-oriented around our data.
Okay.
Extremely data driven.
Okay.
And so, you know, I think our concern, and this is why this is the year we're gonna make some decisions, is if you start with the free product-
Right
... the question is: do you, you know, dilute the core of what we're trying to achieve?
Okay.
Which is get people into the virtual MVPD, come for the sports, stay for the entertainment.
Right.
So this will require a lot of testing, so we've increased our testing capabilities. Again, back to speed and velocity. We're running, you know, dozens of tests a week.
There's chairs up here, team, if you guys wanna come sit. Anyway, okay.
Yeah. We're running dozens of tests.
Yeah.
We'd like to accelerate that further.
Mm-hmm.
And so the idea is, should we show people content on the way out to at least keep them engaged? And are there ways... Again, this is where we excel, I think.
Okay.
We've done a really good job of figuring out how to get people to stay on the platform.
Yeah.
So that'll be-
Yeah, your churn levels are way down.
Yeah.
Which is fantastic.
So that will be one of the key areas-
You have this great data. What about doing... Like, Vizio makes $100 million a year selling its glass-level data. Could you make a data revenue stream?
Yes. Yes, we can. We can.
Have you thought about that as a new revenue stream, or?
As you know, we... You met with our SVP of global ad sales-
I did
... Dina Roman. Yeah, we just did a deal with EDO,
Okay
... very recently, TVision. So working both on the first-party data side as well as on the third-party data side. So the beautiful thing is we're still very early in our monetization abilities.
Mm-hmm.
which, by the way, is growing, you know, well over double digits.
'Cause, you know, I know the environment externally is out of your control, but when I'm thinking about goals, you know, I am thinking about things like-
Yeah
... data. Like, we have all this-
Yeah
... data. We're data driven. Can we-- This is a year where you could package it, bundle it-
Yeah
... regardless of what's happening in the chaos-
I agree with you.
... in the outside world.
Yeah. Yeah.
This, like, reminds me of that Harry Potter thing, like Voldemort does this and the whole-
Right. Right.
Like, but you can control your little island.
Which is what we've been focused on.
Okay.
So, you know, those initial deals are really you know, allowing us to better understand our audience. And so I think over the next, you know, 12-18 months, again, we have a nice runway. We're gonna focus on that. But yes-
Okay
... we are talking to companies about selling data.
Good.
At the moment.
It's a great idea.
Yeah.
It's something you can control, and CTV data-
Yeah
... is all the rage right now.
Of course.
So.
Of course.
Okay, great. So, your subscriber growth, David, has been very strong. I think part of it is lower churn.
Yep.
Part of it is you really are making this work: "Come for the sports, stay for the...
Yeah.
The fact that the Peacock deal, that they paid $110 million for the playoff game, got 23 million-
Yeah
... people, like, tell me how that affects you. Like, what you think about it?
Well, you know, for me, personally-
Yeah
... you know, the company is very consumer oriented. I think we're one of few companies-
Okay
... in our space. Everyone else is about bill them and take their money and wait till next month, right?
Mm.
We have been very focused on, you know, discovery on the platform. You know, we were one of the first companies to acquire a small, video AI company-
Mm
... back in 2021 before the rage. And so when I think about the Peacock situation, from a consumer perspective, I'm actually... It's, it's sad to see.
Horrified?
I'm horrified. I'm actually surprised, and hopefully I don't scare anyone here, but the-
I think it's an experiment by the leagues.
Yeah, I-
I don't think it's gonna be a thing.
... I think so. But if not, then the FTC does need to take a look at consumer protection law. I mean, you have... You know, people are paying for much of the same content several times, right? You have games-
Well, it was exclusive to streaming, so.
Well, in this case, yes.
Yeah.
But you're still paying for the bundled offer, which, you know, still has a lot of the content that is offered across these different Plus services.
Mm-hmm.
Right? So you're paying multiple times, in some cases, for the same content. But for us, you know, I think nothing has really changed. We're aggregators, and I think for a very long time... Actually, found a quote from 2021, where I said... It was three years ago, exactly, where I said we were gonna go from bundling, to unbundling, to rebundling.
Mm-hmm.
And so-
Yeah
... I think that consumers really, I mean, again, from a consumer perspective, I believe one single app, fully aggregated, where people can discover, content, that it can all be personalized, easily accessed, one bill, and our job is to manage that relationship. So from a subscriber perspective, I think that we're able to, you know, continue to drive growth because of the way, we've positioned ourselves in the market. But I think more than the Peacock situation, I think the YouTube situation was a little bit more scary, I think. You remember?
'Cause of the right to Sunday Ticket thing?
Yeah, and-
Which is a multi-year deal.
Yeah. Which, you know, I'm not sure we get any credit for this, but if you look at the sort... Right? I mean, I think that's fair. If you look at Q3 , we added 310, roughly, if I recall.
Yeah, yeah.
For me, it feels like it was, like, eight months ago. About 310,000 net additions. Hulu, very large company tied to Disney, packaging up Hulu SVOD and ESPN+ and D+. I think they added something like 300,000-ish.
... the Disney-
Yeah. No, the Hulu live product. I think it was like 300,000-
Yeah
- net additions.
I think they added less than you. My recollection.
Yeah, they did.
It's they added less than you.
I'm just being polite.
Yeah.
Then you have YouTube, which, you know, the force of God.
Yeah.
I mean, they added the Sunday Ticket. They offered... You know, the promos were insane.
Mm-hmm.
I've seen everything from, "Get a full $400 off" -
Mm-hmm
to even, like, these latest ones I've seen. I've seen like, "Get it for $60, $80.
Part of it is the season is ending, so they're cutting.
Yeah, I know.
the price every game that comes out.
I know. But at the same time, you know, that's happening because it's very difficult to monetize. And then when you add on top of that, all of their marketing activity, YouTube, YouTube proper, and, you know, they—I believe they added about 350,000 net additions to their YouTube TV product, not the Sunday Ticket product. So when you look at that in the context, you know, we're actually performing quite well, you know, relative to some very big players.
The only thing I'd say, David, is you're sort of tied to the linear TV ecosystem.
Yep.
as sports rights, which is-
Yeah
... the competitive advantage of linear TV, slowly seep into - I mean, Peacock is a bad example 'cause it's owned by Comcast.
Right. Right.
You would think they would have a lot of incentive to keep the linear TV-
Yeah
ecosystem intact. But as rights seep to Apple or to Amazon or outside the linear TV bundle, it feels like there's less and less value to the linear TV bundle that you're selling. I mean, isn't this an overall threat to you long term, as rights move into non-streaming only-
Yeah.
... let's call it that?
I mean, this is a threat that we've been talking about-
Yeah.
... since 2015 or 2016. At the end of the day, we still have tens of thousands of sporting events, and the NFL deal, which, as we all know, is the most important piece of content, that there's a 10-year deal there-
Yeah, yeah
... in place. So we're talking-
By the way, over the weekend, they were talking about it owning part of the ESPN. That would make it a 50-year deal.
Right.
If the NFL does a deal to own part of the ESPN-
Right, exactly.
That's linear TV bundle.
Exactly. And so, at the end of the day, sports needs distribution.
Yeah.
We all know it's a loss leader. It's very expensive, and when fully distributed, it achieves the goals of all the stakeholders. When you look at MLS, that's a good example. It actually, you know-
MLS, Major League Soccer.
Yeah, sorry, Major League Soccer. It's tough, right? It's just tough. So fully distributed across, you know, platforms like ours, I think, is the future. It just—I don't, I don't see it any other way. And let's not forget, I'll say little Fubo for now, relative to everyone else, but, you know, if you just look at our financials, we spend about, what is it? $1.2 billion on content.
Mm-hmm.
So we're, I would like to say, subsidizing plus services. So it's a massive revenue stream. You know, in some cases, wholesale prices, because these deals are older-
Yeah
... might actually be with promo pricing on plus services, could actually be lower in some cases.
Mm-hmm.
Right? And so as prices, relative prices rise, you know, the bundle becomes more and more relevant over time. So I think this is the only way that people will watch TV in the bundled world. And I just want to make clear that there's a big, big difference between what we're doing and what others are doing. Xumo or Charter, we don't want to be an app store. That is not our job, right? I know some want to focus on having all these apps, and we are about consumer experiences, and so we want to be a video bundle, not just an app store.
And so, we wanna package content up, create opportunities for media companies to access high-quality data, you know, give them information as it relates to different programming, help them monetize their content, provide consumers with a real, seamless experience in a premium environment. And that's a little bit different than what I'm actually seeing as what the goals are for some companies.
Okay. So I do think there's a consensus on Wall Street that TV is moving towards the phone with the apps, and you're saying you want to do channel, which is the old linear TV bundle look, where it's just a grid of channels. That's what you're saying?
No, I'm saying... Well, you know, we have over... Well, first of all, we have, like, 2,000 feeds, but we also have about 30,000 VOD assets-
Okay
... on the platform. So it's a combination of live and on-demand program.
So when you say no apps,
What I'm saying is-
You just don't like the postage stamp?
What I'm saying is the app store is a very broken experience.
I see.
What do I mean by an app store? So you go into Amazon Prime. There's a Fubo app.
Yep.
You're watching-
Or Spectrum or-
Yeah, right. I'm just-
Yeah
... Right. All kinds of apps, right? So you're watching MSNBC on Fubo, and you realize it's Thursday night, and you need to go to some other app to go watch Thursday Night Football.
Yeah, yeah, on Amazon.
In this case, it's on Amazon.
Yeah.
But if you wanted to watch, you know, the Notre Dame football game, you need to now leave this app, go into the Peacock app.
That's true.
One is, it's problematic for people to jump around-
Mm-hmm
... all these apps, which means you're losing viewers, because-
That's true
... some people are just-
Friction.
Yeah, there's-
Mm-hmm
... lots of friction points, so reducing friction is important. And then the other thing is, with all the major technology companies wanting to become the app store or that homepage-
Mm-hmm
... that you get, they don't have any data. So think of it this way: You... Let's use foreign companies. I don't want to talk about U.S. companies.
Okay, no problem.
Let's say you're in France-
Mm-hmm
... and you have Canal+.
Yeah
... which is like a Comcast. And, you know, you're on the myCanal app, which is like, you know, any other virtual MVPD app, and basically, you deep link into the Disney+ app to watch Star Wars.
Yep.
So Canal+ says, "Oh, wow, you know, I'm gonna tag this person. They like Star Wars." They go into the Star Wars—you know, they deep link into D+... open up the Star Wars page, and then they say, "You know what? I'm gonna watch Moana," or whatever, something else.
Mm-hmm.
They hang out and watch all these animated shows for the next two weeks on Disney, and never actually watch Star Wars.
Okay.
Because you've lost the connection to that viewer-
Yep
... you can't even help them surface other content-
Right
... that is similar.
Discovery gets-
Discovery is completely out.
Right.
You know, it just won't work, and then also, you're just not able to create profiles for advertisers as well. So for me, it all comes down to being in the video bundling business, and not in the sort of app store. And I don't mean to-
Mm-hmm
... say it in such a negative way, but that's what it is, right? You're just picking apps and-
Okay
... jumping in and out. So, and given the amount of content that's available out there, I mean, we have about, I think, 150,000 assets. So we need to figure out a way already-
Mm-hmm
... how do we get people to watch it? As much as we think that, you know, the bundle's losing value, we're still over 100 hours of viewing per month, per customer.
Mm-hmm.
Those are strong numbers.
Let's go to gross margins.
Yeah.
One of the things you're my favorite whenever we meet-
I know. I know, I know
... for breakfast, are you and I on gross margins.
I know.
So let's talk about cost of content at the gross margin level. Gross-
Yeah.
Talk to me-
Okay
... what's happening with costs.
Yeah, so...
You've been doing a great job, by the way.
Yeah, thank you.
Gross margin has been going up for the last five months, so.
Yeah, I think people were... Yes, they have, and I think we've improved year-over-year. Don't quote me on this. I want to say around $100 million of EBITDA-
Yep
... which is a very tough thing to do for a smaller sized, media company or distribution company, within a year. I think we've done it almost now 18 months. From a gross margin perspective, I think that this... Again, going back to the super aggregation strategy-
Yep
... We've done a pretty good job, I would say, at driving ad revenue. I think if I'm not mistaken, ad revenue is up about 35% in the Q3 , year over year. Which I think when we signaled that we thought Q3 was gonna be strong back in the Q2 , everyone was kind of like: "Eh, I don't know if I can believe that." So, with the super aggregation strategy, I think there's gonna be real room for us to drive ad sales. So I think from a revenue perspective, there's some real upside still to focus on in 2024.
So that's your gross margin strategy, not on the cost side?
No, so there's-
It's more on the advertising side?
It's multiple. I never look at anything as, like, you know, you have to be able to pull all the levers because you just have to.
Okay.
You never know which lever is gonna be more important in any particular quarter.
Okay.
So we'll focus on revenue upside, packaging optimization-
Okay
... advertising
Packaging optimization is like selling three-month bundles. Is that what you're-
If you go in every day from a different IP address, you'll see there's very different offers.
Okay.
All of that is just being A/B tested.
Okay.
So that will continue to happen.
Okay.
On the cost side, as we have been doing a good job, you know, we're actually quite lean already.
Mm.
We have about, as you said, like 550-ish employees. I don't plan to increase the, you know, staff size for the next, call it 12-18 months.
Okay.
Only because I wanna maintain speed and velocity.
Mm-hmm.
and so the only other area for me on the COGS side to focus on is the broadcasting and transmission. So I think there's some room-
Not the renegotiations? Do you gonna have nothing coming up in 2024?
Well, we have stuff coming up-
I thought NBC was coming up in 2024.
Perhaps.
Yeah, perhaps.
Yeah.
Okay. All right.
I don't know if I'm at liberty to say. Maybe.
Okay.
Well, the good news is there's a deal up every year.
Yeah, there's a deal up every year, so-
So, it's gonna be one of the big four deals.
Right.
So, yeah, look, there are deals that are coming up, all the time, so there'll be some more leverage around, content costs.
Mm-hmm.
But again, you know, we're sort of, kind of a weird situation because you have media companies that make a lot of money just distributing to us. When I say us, it's the whole industry. And at the same time, they're trying to grow their own streaming services. So, you know, I don't like to put a lot of eggs in baskets like that, where you just don't know how things net out.
Okay.
So yes, they can go up, they can go down, they can be flat. We might decide, you know, maybe there's some penetration rates that will change-
Okay
... favorably. But I think to be focused on what is in our control today, in January, that those deals are mid-year.
Okay.
Mid-year to end of year.
Yeah.
You know, we're probably gonna continue to focus on things like, you know, the technology costs-
Mm
... that are related to COGS.
Right.
Which in this case is broadcasting and transmission.
Mm-hmm.
We've used technology, I think, very well over the last year, to drive down costs, cloud costs.
Yep.
We launched our own data center in Denver, all NVIDIA chips, which is nice. It looks beautiful.
Mm-hmm.
So yeah, we're continuing to focus on achieving our profitability targets-
Okay
... in 2025.
Okay. Let me take questions. Yes, sir?
You're doing a great job. Numbers-
Thank you.
I'm just going by the numbers.
Yeah
... but frustrating being public right now? It seems like-
No, 'cause he loves talking to me.
Yeah, but I was talking to you before we went public. I think my first-
That's fair. You could be private and still be talking to me.
Yes.
That's a fair point, so-
That's a good point.
... his question stands.
You know, You know, as an entrepreneur, my frustration lies is in my inability to build a business the way I think it should be built, because there's a lot of us now. And so you have to take in mind, you know, how shareholders feel, how investors feel, how the street feels. But, so it's a balancing act. So I'm a bit frustrated because I think we could do a lot more, and obviously, the environment has changed completely.
Yep.
And I think it's incumbent upon myself and members of my management team to sort of understand where we are today and what the requirements are. But I do believe, you know, if you sort of forecast out 5-7 years, you know, I think if again, it's timing is everything. I think Spotify was able to grow in a time where growth was the only thing that mattered, and that created great opportunities for them and scale. And so unfortunately, we just have to balance. So I am somewhat frustrated, but so is life, frustrating.
I guess the second part of that is five years from now, if you can continue to perform-
Yeah
as well as you've been performing, and the way the market's looking, it's-
Yeah
- Companies like yours, stocks still may be $2.5-$3.
Until it's not, right? I think... You know, I just had this conversation with Alison on the way over here. You know, it's tough to say how investor sentiment works. In my view, just as someone who also invests in private companies, because I love startups, you know, I wanna know that the company that I'm investing in is going to win. It's gonna be one of the leaders in the space at some point. And, you know, sometimes, you know, you can't actually build on that plan because you have short-term needs, right? I think one of the key things that why startups or startup entrepreneurs believe they can win, you know, you can face Google and Comcast, and because you know you can move faster, you know that you can be more decisive because your organization is flatter.
There's dozens of reasons why startups believe they can win, and we've historically seen how often startups, you know, Zoom defeating Cisco, in the video conferencing space. Who would believe that? You know, gazillion-dollar company, 500,000 employees, resources, I mean, they have everything. So to me, that part is a little bit frustrating, but I also realize that at some point when you, people run out of reasons to tell you, you will fail. You know, I think Amazon has come up every year in almost every conference I've ever spoken at. Amazon has been the threat. 2016-
But it is a threat. In fairness, it's still a threat.
I know, but you know, it's now... Of course, there's always gonna be threats.
Yeah.
But it's, "Oh, they got Thursday Night Football, you're dead." "Oh, they got Sunday Ticket, you're dead." "Oh, Facebook bought LaLiga in India in 2016, you're dead." "Oh, Disney's launching, you know, ESPN+. So again, it's a big country. There's lots of value to be created, and, you know, again, sometimes I feel like it's a little bit too small for me, personally, but I have a job to do, and the goal is to drive, the value for customers and shareholders. And I think over time, you know, that three comes, becomes-- I mean, we were one, a $1 stock, weren't we?
Yeah, yeah.
Less than 12, maybe 12 months ago. So I guess, you know, being an optimist, you could argue that, you know ... good growth, I guess. Yeah.
Any other questions for David?
So-
What's your... How do you trade off growth and free cash flow? You know, I think companies that are consistently free cash flow positive do not stay single-digit stocks. They explode. Maybe in this business, there's only one company that makes money, so maybe that's why everything's depressed, that there's only one company that can generate free cash flow.
Yeah.
Are you able to eventually do that, sustained and grow?
Well, I think the interesting thing is that we were able to improve our EBITDA within 12 months by about $100 million bucks, roughly, right? That, to me, is a very big move. And so, I mean, it's not crazy for us to improve our, you know... Laura mentioned the content deals, right? We pay a $1.2-ish, I don't know, $1.1, $1.2, on a run rate basis, for content for 2023. I gotta be careful. And so if you were to improve those deals by just 10%, 8%, 7%, 6%, you know, basically, you were free cash flow positive. So, it's not a crazy thing to flip the switch at some point.
What is unfortunate, and as Laura said, some things are in your control, some are out, is that the media landscape is in some crisis overall. Because I don't know what it is, I think. You know, what's interesting, it's actually ironic because everyone's talking about how, you know, the plus services need to figure out bundling, and they're trying to do a deal with Verizon, and they're trying to do a deal with Walmart or whoever, or Amazon. The reality is, we are an independent aggregator that is already bundling, that has, you know, no conflicting interest, that is 100% aligned. So they're looking for every solution, and this is an industry thing, it's not one player. When the solution is right in front of them, they're getting 75 million, correct me if I'm wrong, 60 million pay TV households plus 15 virtual.
I'd say 65.
65 plus 15, where are we? I don't even know where we are.
Well, actually, no. Now, streaming? Streaming is like 80-
Well, pay TV plus virtual MVPD, what is that now?
Oh, oh, oh, yes.
It's like-
Then you're up to 75.
Right. So if you think about what is the cap for any plus service, let's just use the gold standard, Netflix. I bet they're probably U.S. only in the 69-70 million range.
Mm-hmm.
Canada, I don't know what Canada is, but if that is the gold standard, you already have more than that. You have no churn, right? We are helping you amortize your marketing costs for every show across all of our, right, services, 'cause we're marketing.
You're talking about NBC? You're talking about content creators? Is that what you're talking about-
Yes, I'm talking about-
Yeah, for content creators.
... we, the distributors, pay TV-
Right
... all pay TV.
And stream.
MVPD plus virtual. We're already giving you scale. We're already paying fees. You're already monetizing the content. In this new world that, I guess, that they're trying to figure out or fighting for, they wanna pay a commission to Amazon, right? They have to. They have to pay commissions to, at some point, to Verizon. They're having to deal with churn. They have-
They, as the consumer?
Sorry, they meaning the content creator,
The content creators.
... the plus services, right?
Okay, got it. Okay.
Because they're looking for bundling. Everyone is saying, all the-
Yeah
... all the analysts are saying: "Well, hey, if you don't bundle, your churn will-
Go through the roof.
... outpace your-
It's true
... your ability to drive growth. The solution is here. And I've said this many times over the last two years, the market is moving in our direction. I think ultimately there will be capitulation, and business outcomes will prevail. At that point, I think what you're saying is, how do you sort of get there? I think that will become quite evident.
Other questions for David? Okay. I think we're right up against time. We are. We are up against time. Thank you very much, David.
Thank you. Thank you,
Thank you very much, David.